Short-Term Thinking Is Poisoning American Business

[Zorro]

In 2007, James Rogers did the unthinkable. As chief executive of Duke Energy, one of the largest coal-powered utilities in the country, he lobbied for the passage of aggressive cap-and-trade legislation. The bill, if passed, would have imposed billions of dollars in costs on his business, and it was vigorously opposed by the coal industry’s primary lobbyist.

Mr. Rogers, who died in 2018, was no masochist; he was a visionary who understood something fundamental about the relationship between time and profits: Over the long run, the profitable thing and the right thing are usually the same.

We live in an economy increasingly at odds with this truth. Short-term business practices are polluting our environment and harming our health and well-being for the sake of quick payouts.

The evidence of a growing short-term orientation among American public companies isn’t hard to find. Boeing’s corner-cutting on the Max 737, Wells Fargo’s fraudulent customer accounts and Johnson & Johnson’s opioid scandal are all examples of short-term behavior with disastrous long-term consequences.

https://www.nytimes.com/2019/12/21/opinion/sunday/capitalism-sanders-warren.html

[OAITW r.2.0]

1. It's been happening for way longer than that.

Jack Welch, ceo of GE, was my first dealings with that. I used to buy DC motors from the GE plant in Lynn, Ma. These were industrial, large HP for our machine tools we were building -production drills, surface grinders, gear hobbers. Ordering was predictable until around '82. Lead-time went from 4 weeks to 16 weeks! Disaster for us, we had to scramble to cover our booked orders.

When I asked what was driving this, the sales guy told me production had been moved to Mexico! Thanks for the heads-up Jack! But my next question was....what if every industrial company in the US outsources their production to other countries, how will this impact our country long term?

We're living the answer to that question.

[Zorro]

2. GE is a great example of short-term thinking ruining a once-dominant company

and Jack Welch's protégés have infested corporate America with his business philosophies.

[OAITW r.2.0]

3. I worked direcctly with 4 Ops guys that had ties to GE in my careeer.

Once upon a time, new tooling justifications allowed for 3 year payback in the justification analysis for the investment expense. When that changed to 12 month payback, it was hard to justify US sources for tooling when off-shore companies could produce at a fraction of the cost. When CAD technology took off, so did the off-shoring opportunities. Logically, production followed tooling for the same reasons. And most of the jobs went away, too.

GE Jack was the architect for our US manufacturing capitulation, but the GEs stockholders sure made money with Jack in the driver's seat.

[Zorro]

5. And today's GE sure is not what it once was

GE's stock price is around $11/share these days, and it was recently dropped from the Dow after being one of the original companies when the DJI was created. It's a great example of the lack of long-term thinking and planning.

I was at TRW when one of Welch's minions (David Cote) took over. Cote's (and Welch's) belief was that 20% of all workers are slackers, and demanded his underlings ensure that "quota" was met in annual performance rankings. However, many functional managers did not even know what their assigned employees really did, because they lacked approved program accesses -- so those working sensitive jobs were disproportionally categorized as deadwood.

After a short time at TRW Cote quit unexpectedly and moved to Honeywell as CEO, and transformed that highly respected company into another piece of a GE-like conglomerate (AlliedSignal, now renamed as Honeywell to capitalize on the original's reputation).

So yes, I agree with you that Welch's influential business philosophy contributed significantly to the state of corporate America today.

[OAITW r.2.0]

7. LOL, can I relate.....

Last company I worked at was a medium sized industrial signaling company. We had the best fire sensor technology in the 90's. Firdst microprocessor based sensor that changed the way fire sensors were built. I was very much involved with in-sourcing our plastic injection molding (consolidated all of our tools in house, did away with trucking in parts, immediate quality feedback of parts being produced, no more packaging costs and disposal headaches, etc). All done with a company that brought us the latest molding tech in-house.

Then we got inquired by GE, then Honeywell. While the work I did kept the plant up and running for a lot more years, manufacturing eventually got outsourced to China. Oh well, they had a jewel in this company, a great manufacturing/design group, and JIT manufacturing of plastic and SMT electronics....didn't really give a shit about that, just wanted to reduced product costs...and paid the price by not valuing the asset that they destroyed.

[bobbieinok]

4. In 90 at a seminar in Germany was told Gm comps found it v hard to work with Am ones

German companies planned at least a yr or more into the future. Am ones just wanted boltom line in 3 months or less.

German business people were constantly frustrated trying to do a joint venture with Americans

[AJT]

6. This won't help....

WASHINGTON—More Americans would be able to reap the rewards of investing early in the next Uber Technologies Inc. or Facebook Inc. under a proposal advanced Wednesday by the Securities and Exchange Commission. They could also get more chances to lose their shirts.

https://www.wsj.com/articles/sec-proposes-giving-more-investors-access-to-private-markets-11576691685

[PETRUS]

8. "Over the long run, the profitable thing and the right thing are usually the same."

Possibly true, but I can't help recalling Keynes: "But this long run is a misleading guide to current affairs. In the long run we are all dead."